Smartshares bulks up with ASB purchase

NZX's funds management business Smartshares increases FUM by a third after doing a deal with ASB.

Thursday, November 11th 2021, 7:27PM

NZX has bought the management rights for ASB’s Superannuation Master Trust, a $1.8 billion retirement savings scheme.

The trust is a workplace superannuation scheme that predated KiwiSaver and was used by state sector employers until 2008.

Although it closed to government employees shortly after KiwiSaver came into being, it still has more than 17,500 members from more than 100 employers who were in the scheme.

Smartshares, an NZX subsidiary, has bought the management rights for the fund with $25 million in cash.

NZX chief executive, Mark Peterson said the acquisition would scale the funds business which currently manages a total of $5.9 billion, with $1.4 billion of that workplace savings.

“This will help us achieve the scale necessary to maintain our market leading position in low-cost passive investment solutions in New Zealand,” he said.

The addition of ASB’s retirement savings will be a 30% increase in funds under management for Smartshares which has already organically grown 30% in the past year.

The transition is expected to occur in either late 2021 or early 2022 with a transition of services over the following two-year period.

Focus on KiwiSaver

ASB general manager private banking, wealth and insurance division, Adam Boyd said the divestment allowed the bank to focus fully on its KiwiSaver scheme and other investment offers.

“By focusing on these core offerings, we can continue to invest in enhanced customer experiences and performance,” he said in a statement.

Earlier this year the bank announced it would partner with the world’s largest investment manager BlackRock to create cheaper and more diversified funds.

The acquisition is expected to contribute over $4 million annually to NZX’s operating earnings – excluding integration costs – which will be factored into the financial year 2022 guidance to be released in February.

The acquisition will be funded from cash on hand and new debt facilities, with $1.3m of transaction costs being reported in the 2021 financial year.

NZX’s board of directors confirmed full year earnings guidance would still be between $32m and $35.5m as previously stated.

Growth engine

In August, the stock exchange operator signalled it was looking at possible acquisition opportunities to bolster the funds management division which has been key to revenue growth in recent years.

The NZX’s funds management and wealth technologies businesses are helping the exchange grow their business even while core market revenue stagnates.

This move has been met with some resentment from other fund managers who feel NZ’s public market is already much too thin and now they have to compete with the exchange to buy a slice of it.

Peterson, on the other hand, said the passive fund manager was complementary to the markets business as it adds liquidity and supports listings.

“This acquisition, and expansion of our workplace savings management under Smartshares, showcases the potential of the opportunities we have been exploring and the excellent fit of our funds business with our wider business,” he said.ACT
Superannuation acquisition from ASB adds further scale to NZX’s funds business

Tags: ASB